Jan 21, 2013

Vietnam – Firms in cross hairs of the transfer pricing teams

Anti-transfer pricing enforcement will be a top priority for the Vietnam
tax authority in 2013.

Bui Van Nam, head of the General
Department of Taxation (GDT), said one of the main tasks for the tax authority
in 2013 would be the inspection of related party transactions, a method of
transfer pricing often employed by foreign-invested enterprises (FIEs).

Transfer pricing issues are
present in many FIEs in Vietnam, especially multi-national companies with a
large system of markets in the world. Famous foreign names such as Adidas,
Coca-Cola, PepsiCo, Keangnam Vina, BigC and Metro Cash & Carry have been
suspected by local tax authorities of possible transfer pricing violations in
Vietnam.

“Big cities and provinces with
many FIEs such as Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong and Vinh Phuc
will amplify anti-transfer pricing activities which will focus on FIEs with
signs of transfer pricing,” said Deputy Minister of Finance Vu Thi Mai.

According to the GDT, these big
cities and provinces will focus on transfer pricing inspection in five
different sectors.

Specifically, Hanoi will inspect
transfer pricing in construction and real estate, Ho Chi Minh City in garment
and textile sector, while Dong Nai, Binh Duong, Vinh Phuc in automobile and
motorbike assembling, fabric production and cloth weaving and mechanical
manufacturing.

“Many FIEs in Vietnam appeared
party to transactions of transfer pricing with its parent company or other
member companies in foreign countries,” GDT deputy head Tran Van Phu noted,
despite acknowledging FIEs’ important role in Vietnam’s economic development.

“Thus, Vietnamese tax authority
is promoting cooperation with foreign tax authorities to raise efficiency in
anti-transfer pricing, and ensure fair business environment for all investors,”
said Phu.

In 2012, Vietnamese tax
authorities carried out inspections of 1,495 enterprises reporting losses as a
transfer pricing signal. After the inspections, many enterprises adjusted to
report profits instead of losses.

Mai said the Law on Tax
Administration, to take effect on July 1, 2013, will apply Advanced Pricing
Agreement, considered an efficient means to curb transfer pricing.

However, Mai said enforcement was
hampered by a lack of a data system on FIEs and heavy state official workloads.

Nguyen Trang | vir.com.vn

Business & Investment OpportunitiesSaigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area.
We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.